Traders work on the floor of the New York Stock Exchange during morning trading in New York City on September 6, 2022.
Michael M. Santiago | Getty Images
The Dow Jones Industrial Average fell on Monday as soaring interest rates and foreign exchange volatility weighed on the market.
The Dow fell 76 points, or 0.3%. The S&P 500 rose 0.2% and the Nasdaq Composite rose 1.1%.
Consumer discretionary and information technology supported stocks, rising 1.3% and 0.8%, respectively. Casino stocks led the gains. Wynn Resorts rose 12.4% and Las Vegas Sands rose 11%.
The pound fell to a record low against the dollar on Monday. Sterling fell as much as 4% to an all-time low of $1.0382. The U.S. Federal Reserve’s aggressive rate-hike campaign, coupled with the U.K.’s tax cuts announced last week, sent the dollar soaring. The euro fell to its lowest level against the dollar since 2002. A surge in the dollar could hurt the profits of U.S. multinationals and wreak havoc on global trade, much of which is traded in dollars.
“This dollar strength has historically led to some kind of financial/economic crisis,” Morgan Stanley chief U.S. equity strategist Michael Wilson wrote in a note. “If there was ever a time to find something to break, this is it. .”
Traders will be watching closely to see if the S&P 500 falls below a bear market low on Monday. The S&P’s June low for the year closed at 3,666.77. After a brief dip below that level, it closed at 3,693.23 on Friday. The benchmark’s intraday low for the year was 3,636.87. Any trade below these levels could lead to more selling in the market.
The stock market ended a brutal week on Friday, with the blue-chip Dow hitting a new low for the year, closing as low as 486 points. The broader S&P 500 temporarily dipped below its June closing low, closing down 1.7%. The tech-heavy Nasdaq Composite fell 1.8%.
Another outsized rate hike by the Federal Reserve last week was the catalyst for the market’s latest decline. The central bank said it may raise interest rates to 4.6% before pulling out. The forecast also showed that the Fed plans to act aggressively this year, raising interest rates to 4.4% by the end of 2022.
Bond yields surged after the Fed raised rates by another 75 basis points. 2-year and 10-year U.S. Treasury yields reached highs not seen in more than a decade. On Friday, Goldman Sachs cut its year-end target for the S&P 500 to 3,600 from 4,300.
Interest rates surged again on Monday, with the 2-year Treasury note breaking above 4.29% at some point in the day.